Himax Technologies, Inc. (NASDAQ:HIMX) Q4 2023 Earnings Call Transcript

With that, I would now begin with an update on the large panel display drive IC business. In Q1 2024, we anticipate a sequential decline of single-digits in large display driver IC revenue, primarily attributed to weaker-than-expected sell-through during the slow season. As I mentioned, panel makers are deliberately lowering factory utilizations, striving to safeguard panel prices by constraining panel supply amidst the prevailing sluggish market. We expect Q1 sales for TV and monitor ICs to decline quarter-over-quarter. However, Q1 notebook IC sales are poised for decent increase, bolstered by customer restocking following several quarters of muted demand. In the notebook market as customers strive to differentiate and add value to their products, a discernible trend is unfolded, marked by increasing adoption of touch features and AMOLED displays in premium notebooks and upcoming AI PCs. Touch features enhance user interaction and enrich AI user experience, while AMOLED display elevates visual enhancements in areas such as gaming and entertainment.

It’s crucial to emphasize our heightened focus and the growing significance of both technologies. Notably during CES this year, we unveiled industry leading on-cell AMOLED touch controller and in-cell TDDI for premium OLED and LCD notebooks, respectively. Our on-cell AMOLED touch controller is designed to address this demand for accurate touch response and enhanced handwriting capability in the emergent mid-size OLED displays for notebooks that feature thinner, lighter, brighter, and wider color garment visual experience. What distinguishes our touch controller is a comprehensive set of features, which include support for various OLED panel types in rigid, flexible, and hybrid. The capability to handle responsive touch operations of up to 10 fingers and compatibility with various industry standard active stylus protocols.

By expanding our OLED portfolio to include the touch controller IC along with existing DDIC and Tcon, we provide a comprehensive AMOLED notebook solution. Meanwhile, our recently launched in-cell TDDI for LCD notebooks offers precise touch sensitivity, vibrant multi-finger operation, and acute active stylus functionalities, along with support for large size, high resolution, low power consumption, and slim bezel designs. By leveraging these extensive product portfolios, we are well positioned to capitalize on this market shift through collaborations with key Korean and Chinese panel makers where mass production is scheduled to commence in the second half of this year for next generation premium notebook models. Furthermore, the incorporation of high value-added features increases the content value gained per panel while presenting the new opportunity for Himax.

Looking ahead to 2025, we anticipate a decent replacement cycle when armed with leading solutions for higher market launched lately, Himax’s presence in the notebook market will be further lifted. Turning to the small and medium sized display driver IC business, first quarter revenue is expected to decline high teens sequentially on the backdrop of traditional low seasonality where demand for consumer electronics remains sluggish. Smartphone and tablet sales are projected to decline single digit and double digit, respectively in Q1. Automotive revenue is also expected to decline mid-teens sequentially following robust order replenishment in previous quarters. In contrast, Q1 automotive TDDI sales are still poised for sequential growth, defying recent reports of slow electronic vehicle demand in China.

The swift and ongoing expansion of TDDI adoption, as evidenced by our over 400 secure design-win projects, positions us significantly ahead of our peers. With approximately 30% of awarded projects currently in mass production and a continuous influx of new pipeline and design wins across the board, our leadership position is reinforced looking ahead into 2024 and beyond. Remarkably, automotive TDDI sales are anticipated to account for almost half of total automotive driver sales in Q1. Meanwhile, a prominent trend is emerging as more customers opt for our TDDI or LTDI, coupled with our local dimming Tcon as their standard development platform for crafting new automotive displays of various sizes. This movement has drawn the interest of leading panel makers, Tier 1s and car manufacturers across the spectrum who acknowledge the benefits of our supreme bundle solution to accelerate their new panel development and elevate their product values.

Moving on to our industry leading LTDI, Himax is proud to be pioneering the introduction of LTDI to the automotive display market. Once again, we stand as the first company in the world to initiate mass production of LTDI, starting with Geely Auto’s NEVs in the third quarter of 2023. For displays larger than 30 inches, the incorporation of LTDI signifies increased content value for Himax on a per panel basis, where such large displays usually necessitate six or more LTDI chips and at least one local dimming Tcon. This opens a new revenue stream for us and fortifies our market leadership moving forward. During CES this year, Himax presented the most comprehensive product lineup for display semiconductor technologies, ranging from traditional DDIC and TDDI to cutting edge LTDI and local dimming Tcon for LCD panel, and extending into AMOLED display solutions.

Our AMOLED portfolio, which used to be comprised of DDIC and Tcon, now expands to on-cell touch controller. It’s important to point out that the automotive industry upholds stringent standards of quality and reliability, surpassing those of consumer electronics. In acknowledgment of these heightened requirements, our recently unveiled AMOLED touch control IC is meticulously engineered with an industry leading touch signal to noise ratio exceeding 45 dB, making it the ideal solution to meet the needs of flexible OLED panels often required for automotive application. It also provides improved sensitivity to challenging user conditions such as glove-wearing and wet-finger operations, guaranteeing exceptional performance with display quality free from interference by touch display interactions.